Logistics and fleet solutions firm Super Group says while it expects the global landscape to remain volatile, it is banking on its diversification strategy coupled with strong cash generation to help it withstand the incoming headwinds.
The company provides logistics and mobility solutions across Sub-Saharan Africa, the UK, Europe and Australasia through its supply chain, fleet solutions and dealerships businesses, and operates a fleet of more than 287,000 vehicles and manages over 322,000m² of warehousing in SA.
The group, in its integrated report published on Tuesday, warned that the trading environment for the SA supply chain businesses would remain “a difficult one” amid high inflation and persistent structural challenges locally.
CEO Peter Mountford, in his letter to shareholders, said there was little hope of the macroeconomic environment changing as the supply of semiconductors remains volatile, with supply challenges expected to extend into late 2023 and early 2024, and the shortage of new vehicles set to persist.
The negative outlook was backed by group CFO Colin Brown, who said weak economic growth and trading conditions, including the price of fuel and interest rates, would continue to affect its businesses.
However, Mountford was upbeat about the company’s African supply chain business, saying that while the operating environment “may seem daunting, it presents opportunities to innovate and grow market share”.
“Improved commodity prices and volume increases across all commodities should continue to benefit the division, with low inventories and growing export volumes expected to maintain activity levels into 2024,” he said. “Further improving volumes in hospitality, entertainment and quick service restaurants are also expected to bolster performance.”
Mobility and logistics solutions play a critical role in today’s interconnected world, and the industrial transportation company with an R11bn market capitalisation on the JSE said its diversification was a deliberate strategy to optimise returns while minimising risk.
A cocktail of manufacturing and protracted supply chain disruptions, worsened by load-shedding, alongside a weak rand, affected the affordability of new vehicles, parts and specialised equipment, hurting the group in the 2023 financial year.
Despite the tough conditions, Super Group reported its financial performance including revenue and earnings before interest, tax, depreciation and amortisation (ebitda) for the year to June had significantly exceeded that of pre-Covid levels. Operating profit increased 20.7% to R3.95bn while headline earnings per share (heps) rose 23.3% to 469.4c.
Strong sales performances in Supply Chain Africa, new business wins and contract renewals were at the heart of the growth. The firm, which generally passes increases on to clients in the supply chain and fleet solutions divisions through contracted escalation clauses, said its investment in technology and fit-for-purpose assets had unlocked efficiencies and created capacity for growth.
Mountford said that leveraging the company’s market-leading technology would be essential to enhancing its competitiveness.
The Johannesburg-based group uses technology to design and deliver dynamic supply chain solutions to its principals and customers.
The CEO said innovative technology and market diversification underpinning a robust growth strategy, new business wins and contract renewals should continue to boost revenue growth in the consumer businesses.
Touting a rigorous focus on costs and effective management of working capital, the firm said it remains highly cash-generative and continues to explore local and international acquisition opportunities that meet the group’s strategic requirements and create shareholder value.
Super Group raised a five-year corporate bond at the end of June amounting to R810m to fund the 78.82% acquisition of UK-based logistics firm CBW Group — trading as Amco — for a purchase price of £30.3m.
The company said the move would significantly complement its supply chain offering.
“The powerful combination of diversity, technology, scale and experience provide Super Group with a competitive edge that translates into value-creation capabilities for shareholders and other stakeholders,” said Mountford. “Over the past decade, shareholders’ equity has grown from R4.3bn at June 2013 to R19.5bn at June 2023, a compound growth rate of 16.4% per annum.”
Super Group shares closed 0.41% higher at R31.96 on Tuesday.
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